Gold, silver, pgms, mining and geopolitical comment and news

Gold – Down in Dollar, up in Euro in Year of Consequences

Julian Phillips’ commentary on the latest action in the gold and silver markets.

New York closed yesterday at $1,212.30 down $6.60 as the euro continued to fall. In Asia the gold price slipped to $1,207.90 with the euro at $1.1807 ahead of London’s opening. The Fix saw the gold price set at $1,206.50 down $7.25 and in the euro, at €1,025.064 up €1.234 while the euro was another 0.85 of a cent weaker than yesterday at $1.1770. Ahead of New York’s opening gold was trading in London at $1,206.60 and in the euro at €1,024.80.

The silver price closed at $16.54 up 1 cent. Ahead of New York’s opening it was trading at $16.37.
There were sales of 2.988 of gold from the SPDR gold ETF, the same as yesterday and purchases of 2.39 tonnes into the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 704.833 and at 162.29 tonnes in the Gold Trust. This was a large purchase into the Gold Trust whereas the sale from the SPDR gold ETF appears to be from the same seller as yesterday, due to the shape of the sale. This is the first time we have seen such a contradiction between the two gold ETFs. In view of the changing trend in the gold price we would expect this sort of market contradiction.

It’s official, the Eurozone has moved into deflation with a drop in the inflation rate to -0.2%. While the E.C.B. is going to pursue quantitative easing, we doubt that it will be successful in stimulating growth. Until governments make the needed reforms and support Draghi and the E.C.B. structural problems in the Eurozone will continue. This requires action by politicians. Unfortunately, politicians are not keen to solve problems, but are keen to solve crises as this route gains votes. So we will have to wait for a full blown crisis before we see a change in the Eurozone.

The euro continues to tumble and so will oil prices. With the euro now at $1.1775 the fall is now brutal which is what Draghi wants. Will it reach $1.10? Unless we see central banks on both sides of the Atlantic intervene in the exchange rate soon, we will reach that level soon.
2015 is already proving a different world to 2014! The year has already seen two dramatic price shocks in the euro and in the oil price. We believe there are many more shocks to come this year, the year of consequences.

With the dollar index over 92, we expect to see the rate of climb slow according to the Technical picture, but with its interest rates set to climb and already so much higher than the Eurozone, will it? The rise in the gold price both in the dollar and against commodities has surprised many as perceived links to gold are proving not to be so, particularly the rise of gold alongside the dollar. But we expect this to continue.

The silver price is trying to follow gold but as gold is showing such strength appears poised to perform stronger than gold. The days ahead may show this.